Risk and farm operator labour supply

This study uses a large increase in US Federal crop insurance subsidies as a natural experiment to identify the importance of risk for farm operator labour supply. Subsidy increases induced greater crop insurance coverage, which in turn reduced farmers' financial risks. Crop insurance participa...

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Bibliographic Details
Published in:Applied economics 2006-03, Vol.38 (5), p.573-586
Main Authors: Key, Nigel, Roberts, Michael J, O'Donoghue, Erik
Format: Article
Language:English
Subjects:
Agricultural policy
agricultural subsidies
Applied economics
Census of Agriculture
Comparative studies
Crop insurance
Crops
econometric models
farm labor
farm management
farm operators
Farmers
Government subsidies
Impact analysis
Insurance
Insurance coverage
Labor supply
Labour supply
off-farm employment
Risk
risk factors
Risk management
U.S.A
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Summary:This study uses a large increase in US Federal crop insurance subsidies as a natural experiment to identify the importance of risk for farm operator labour supply. Subsidy increases induced greater crop insurance coverage, which in turn reduced farmers' financial risks. Crop insurance participation data are merged with farm-level Census of Agriculture data from 1992 and 1997 to compare how individuals' off-farm labour supply changed in response to the policy-induced change in insurance coverage. The empirical approach controls for unobserved heterogeneity and accounts for the censored nature of the data. It is found that greater insurance coverage reduces the off-farm labour supply of operators who produced at least $100 000 of output, and increased the labour su0pply of small-farm operators who produced less than $25 000 of output.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036840500369043